china pakistan economic corridor a geo-economic...

A Research Journal of South Asian Studies

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South Asian Studies A Research Journal of South Asian Studies Vol. 32, No. 2, July – December 2017, pp.461 – 475

China Pakistan Economic Corridor – A geo-economic

masterstroke of China

Inayat Kalim COMSATS Institute of Information Technology (CIIT), Islamabad

ABSTRACT

Development of China Pakistan Economic Corridor (CPEC), with all its associated projects,

favorably influences the geo-strategic and geo-economic prospects of China. Geo-strategic

location of Gwadar further facilitates China to capture transit trade with Central Asia,

Afghanistan and the Middle East and influence this regional accessibility with a viable and

secured corridor for further expansion of regional economic cooperation. Since the emergence of

China as an energy importer in late 90s, it has adopted a „go out‟ strategy to secure energy assets

through procurement and long term energy investment in the energy rich countries, mostly in the

Persian Gulf states and convert historical routes into a modern grid of energy pipelines, roads and

railways for its energy supplies. The strategy aims at using financial means such as building new

seaports, infrastructure development and military and hydrocarbon cooperation between regional

countries to establish an artery for ensuring uninterrupted crude oil supply to its territory. This

Chinese approach has been referred by many intellects around the globe as the revitalization of

the Silk Road Strategy to link China with surrounding regions to generate immense economic

dividends.

Key Words: China, CPEC, Regional Connectivity, Economic Prospects

Introduction

With the end of bi-polarity with the demise of former Soviet Union, the process of

globalization got impetus and geo-economic considerations were given preference

over geo-strategic priorities. New bilateral, regional and global economic

integration models started coming up and regionalism within the domain of

economic globalization assumed immense significance for regional economic

development (Rahman, 2011). This regional framework of cooperation has made

the entire world interdependent at bilateral, regional and continental level to achieve

sustainable economic growth. Pakistan and China were not indifferent to this geo-

economic trend and both countries fully realized to institutionalize their bilateral

trade.

Since 1960s, Sino-Pakistan political and military relations have substantively

strengthened. However, cooperation on the economic and trade front remained

sluggish until 1991. China has recently signed numerous agreements with Pakistan

to reinforce diversified cooperation for the enhancement of bilateral trade that saw

expansion in the bilateral trade over US $ 12 billion in 2012 (Cockayne, March 01,

2014). The initiatives include construction of a new airport; expansion and

extension of the Karakoram Highway, establishment of oil refinery at Gwadar port,

Inayat Kalim

462 A Research Journal of South Asian Studies

overland energy pipelines, constructions of roads and railway lines are the mega

projects which demonstrate Beijing‟s long term commitment to the existing China-

Pakistan Economic Corridor. These economic initiatives come in conjunction with

Beijing‟s substantial investment in Gwadar Deep Sea Port and will benefit an

already well established relationship between the two countries in sustaining their

economic growth (Cockayne, March 01, 2014).

China’s Long Term Fundamental Interests from the Corridor

Since the emergence of China as an energy importer in late 90s, it has adopted a „go

out‟ strategy to secure energy assets through procurement and long term energy

investment in the energy rich countries, mostly in the Persian Gulf states and

convert historical routes into a modern grid of energy pipelines, roads and railways

for its energy supplies (Lin, 2011). Initially, the strategy was motivated by the fear

of US blockade of its maritime supplies over Taiwan issue but later growing

Chinese energy requirement and industrial expansion were the driving force behind

China‟s strategy of energy security. The oil-based economic growth of China has

made it fully realized that oil could be used against it as a weapon to paralyze its

economic growth. That‟s why, China prefers not to rely on unfettered international

markets for its energy supply and energy security by controlling main oil supply

routes has become high priority in China (Ibid). The strategy has mainly centered

on using financial means such as building new seaports, infrastructure development

and military and hydrocarbon cooperation between regional countries to establish

an artery for ensuring uninterrupted crude oil supply to its territory.

Over the period, the strategy has been referred by many intellects around the

globe as the revitalization of the Silk Road Strategy. Today, China‟s strategy

revolves around establishing its footholds with military or geopolitical influence by

financing mega projects in the Indian Ocean and the Persian Gulf littoral states to

secure sea routes. Day by day Chine‟s energy requirement is growing to surpass

production at home and oil imports have now reached record high in from 2013 to

2016. To ensure sufficient oil supply to its industries and secure its energy supply

from geopolitical uncertainties, China‟s long term energy strategy is to diversify its

sources for crude oil imports and secure its existing energy supply lines (EIA,

2014). According to EIA (US Energy Information Administration) estimates,

China will import over 66 % of its total crude oil by 2020 and 72 % by 2040 as

energy demand in China is expected to increase faster than domestic crude

production (2014, p.11).

In order to secure more reliable oil and gas supplies, China has expanded its

purchases of international oil and gas assets through financial loans in exchange for

oil and gas (LNG) imports on control rates. China investment in exchange for oil

deals have been done with Kazakhstan, Venezuela, Brazil, Ecuador, Bolivia,

Angola, Ghana and Iran (EIA, 2014, p. 10). Over the period, China has become a

fast-growing economy and has emerged extremely influential in world energy

China Pakistan Economic Corridor – A geo-economic masterstroke of China


463

market due to its rapidly increasing demand for liquid fuels and will surpass the US

as the world‟s largest importer of energy (BP Energy Outlook 2035, 2014, p. 351).

China‟s crude oil demand has surpassed from the US and now it is recognized the

world largest oil consuming country. Figure 7.1 below reflects China energy

consumption and production over the years. Until 1990s, China was considered as a

net oil exporter and became the world‟s second largest net oil importer in 2009. The

EIA also reveals that China‟s rising oil consumption has reached to almost one-

third of the world‟s oil consumption in 2013. According to the Oil and Gas Journal

(OGJ), China has 24.4 billion barrels of proven liquid fuels reserves which is

highest in the Asia-Pacific region. China, with its total oil and liquid production,

stands fourth largest in the world energy production market, yet these huge energy

reserves can hardly meet its domestic market (EIA, 2012). China‟s increasing

energy demand hinges on various factors, such as domestic economic growth and

trade, industrial development, power generation, transportation and refining

capabilities (EIA, 2012, p. 4).

Figure 1: China’s oil consumption from 2000-2015.

Source: Figure showing oil consumption growth since 2000 for selected countries, based on data

from BP Statistical Review of World Energy 2016.

Following are some valid reasons for China to cooperate with Pakistan in the

construction of CPEC:

China’s Energy-Driven Economy

China is heavily dependent on oil imports to maintain its 9.5 % exceptional annual

economic growth rate achieved over the past few decades (Kim, 2011, p. 27).

China‟s ability to further expand its industrial-driven economy will directly

epitomize its successes in securing access to energy supply (Blazevic, 2009, p. 62).

Security of energy resources implies security of ports and pipelines and the areas

where China‟s energy transported. That is why, China has one of largest merchant

Inayat Kalim


marine fleets in the world to defend its maritime interests and the number of five

star red flag ships is likely to grow in time as China is already working on an

accelerated civil and naval shipbuilding programme (Goldstein, 2007, p. 26).

Shipbuilding and ocean defence strategy of China has always been high priority as

the country‟s almost 2 billion barrels of oil per annum is transported through tanker

ships via different oceans (King, 2008, p. A1). In the modern times, ships are

reliable and cost-effective means of transportation for oil and its refueling, shelter

and repairs at seaports. China‟s construction of new ports and upgrading of existing

ports is directed to achieve following objectives:

a) To shorten and safeguard shipping routes;

b) To reduce ship docking times;

c) To maintain control of ports so that shipping lanes remain open and free;

and

d) To link newly constructed port with mainland Chinese ports to form a

conduit that can ultimately lead back to China.

To secure its area of critical transportation hubs and supply lines, China has

embarked upon a maritime strategy to establish a link between the newly port of

Gwadar port with its mainland ports to maintain self-sustaining and vertically

integrated network of economic enteritis (Ellis, July 09, 2010). As a result, China

has been successful in expanding its crude oil imports by maintain stronghold in

Middle Eastern Countries (Rania & Florence, October 28, 2016).

China’s Quest for Energy

China is counted the most populous country in the world and has a fast-growing

economy that has increased the country‟s overall energy demand. During the

leadership of the fourth generations, China‟s economic development has

remarkably grown and now it has become a potential global actor. High growth and

development of all sectors of economy has equally raised the demand for energy in

China. As revealed by the Paris-based International Energy Agency, China‟s energy

consumption has surpassed the USA and has emerged as the largest energy

consumer country in the world (Lin, 2011). Over the period, China has achieved a

double digit economic growth by fueling energy to heavy industry.

China, over period of time, has substantially progressed in the industrial

development and has emerged as one of the fastest growing global economies.

According to available statistics, Chinese energy requirement is expected to grow

by 150 % by 2020 if the country‟s economy keeps growing at the rate of 8 to 10 %

per annum. To maintain its economic growth for coming years, China needs to

increase its energy (oil and gas) imports and at the same time has to secure its

current oil import supply (Amir, 2004, p. 122). In late 70s and early 80s, China was

registered as oil exporting country but shortly after the post-cold war, its industrial

expansion and rapid economic growth has converted it as an oil dependent country



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to meet its energy requirement though oil imports, mainly from Persian Gulf region.

Beijing‟s concerted efforts to increase trade and investment, specifically in the

energy sector are motivated to secure ongoing access to Middle East. As a

consequent, China has heavily invested in the energy fields across world. Middle

East‟s abundant energy reserves and low cost of its exploitation has made it more

lucrative than others (Mottaghi, Nouri & Nasiri, 2013).

China‟s rapid industrial development and economic growth has resulted in its

pursuit for energy security. China‟s domestic production of oil remains insufficient

to meet the industrial energy requirement. As a result, China‟s crude oil demand is

rapidly soaring and Chinese heavy dependence on crude oil has led the country to

extend its petro diplomacy to all oil exporters in the world by signing favorable

financial deals and investment with countries like Saudi Arabia, Iran, Libya,

Angola, Venezuela and Central Asian States (Saeed, 2011).

Security of Persian Gulf Energy Resources for China

Persian Gulf, with its 62 % of world oil and 40 % of the gas reserves, is considered

one of the strategic regions in the world (Richard, Murphy, Gause, 1997). The

region‟s vast energy reserves have attracted the world powers attention, especially

China in the present millennium. China‟s global strategy is based on its peaceful

coexistence to support peace, stability and economic development across the world.

The close bonds between China and the Middle East traced back to 500 B.C., when

there were only two prosperous dynasties: Arabian Empire and Tang Dynasty

which traded through the famous Silk Road (Saeed, 2012). By the end of the Cold

War, China had already established strong diplomatic relations with all countries of

Gulf Cooperation Council (GCC) and Middle East. Bilateral trade between China

and the Middle Eastern countries has expanded from US $67 billion in 2005 to US

$118 billion in 2009 (Ibid). For China, Middle East is not only a key source of

energy but also a huge business potential market. Figure 2 reflects growing

dependency trend of China on Middle East for import of crude oil.

Inayat Kalim


Figure 2: China’s growing dependence on Middle East for import of Crude Oil

Source: (World Energy Outlook, 2012, p.6).

Saudi Arabia: Pillar of China’s Oil Diplomacy

Since the third millennium, China has prioritized two main objectives in its foreign

policy: energy and security. To ensure energy supply to its industries, China has

heavily invested in the exploration and extraction of many oil fields in various parts

of the world. Persian Gulf remains predominant exporter of oil to China, despite its

efforts to diversify the oil resources. In the Persian Gulf, China has concentrated

mainly on the two energy rich countries namely Saudi Arabia and Iran. China has,

therefore, developed extensive commercial relations with these two resource rich

countries in the region.

Over the years, China has become Saudi Kingdom‟s fourth largest importer of

its oil. According to the Chinese Ministry of Commerce, mutual trade between

Saudi Arabia and China has increased from 440,000 b/d in 2004 to 500,000 b/d in

2005, reaching by 41 % growth. Bilateral trade between the Kingdom of Saudi

Arabia and China has expanded from US $ 14.5 billion in 2005 to US $41.8 billion

in 2008 (Backgrounder, 2009). In 2011, Chinese oil imports from Saudi Arabia

increased to 1.1 million b/d as a result of an agreement signed between Saudi

Arabia oil firm Aramco and Chinse oil firm Saino Pack (Jones, January 21, 2013).

Saudi Aramco owns refineries in Qingdao and Fujian provinces of China whereas



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Chinese energy firms are contributing in Saudi infrastructure and industry sectors.

Meanwhile Saudi Arabia is also considered one of largest trading partners for China

in the Middle East (Lin, 2011).

Iran: A Reliable and Cost Effective Energy Source

Iran is the second pillar of China‟s oil diplomacy in the region. Iran is the third

largest exporter of oil to China and contributes about 11 % of China‟s imported oil

supply. China‟s trade relations with Iran also traced back to the fifteen century

when trade between these two countries routed through the Silk Road (Saeed, 2012,

p. 233). China has equally invested in Iran in different projects including

exploration of crude oil, production of petroleum, petrochemical, natural gas

extraction etc. In the recent past, China‟s oil imports from Iran have considerably

reduced on account of US sanctions. Currently China is importing 402,000 b/d from

555,000 b/d in 2011 (Verma & Cho, May 21, 2013).

Geo-Economic Imperatives of the Corridor for China

Before the construction of Gwadar port, China always found its security interests

compromised due to its incapability to monitor the Persian Gulf and Indian Ocean

region (Sering, 2012, p. 32). Security before Chinese does not imply to territorial

but it is more related with energy and maritime security (Mottaghi, Nouri & Nasiri,

2013). Chinese are fully aware of the fact that Pakistan can only provide shortest

and viable entrance to the Persian Gulf. Security in the Persian Gulf before China is

a high priority as the country‟s oil imports has reached to nearly 55 % from the

region (Schenker, April 26, 2013). Importance of energy for Chinese economy has

pushed Beijing to construct Gwadar port in order to safeguard its oil supply from

the Persian Gulf and also maintain presence in the Indian Ocean to monitor naval

activities of US and India. China will accrue following potential gains from the

corridor.

China‟s main interests in the Gwadar port and CPEC development are to

consolidate its relationship with Pakistan through such large-scale collaborative

economic development projects in order to safeguard its oil supply routes and

diversify its oil import from the CPEC and Gwadar port which is geo-strategically

located at the entrance of Persian Gulf (Haider, 2005, p. 98). China gets about half

of its oil requirement from the Gulf (Sering, 2012, p. 28) and another 30 % from

Africa (Hurst, 2006). Africa is China‟s second largest trade partner with volumes

reaching US $ 107 billion in 2008 (Macharia, February 12, 2009). In 2011, China

received 2.9 million barrels per day import of crude oil from Middle East which

accounts for about 60 % of China‟s total oil imports (Downs, July 06, 2013).

The Kingdom of Saudi Arabia and Angola are the main sources of China‟s oil

imports which account for over 33 % of its total oil supply. Figure 3 shows China‟s

crude oil imports by source. According to estimates, China‟s hydrocarbon

Inayat Kalim


consumption has more than doubled over two decades and would continue to

increase in the next decade. About 85 % of Chinese energy supply passes through

the Indian Ocean to China‟s Pacific Ocean ports (Denmark & Patel, 2009). While

explaining Chinese vulnerability in the Malacca, the Chinese President Hu Jintao

refers it China‟s “Malacca Dilemma” which means that the Chenese reliance on the

supply of energy resources through narrow transport sea lines is a weak point that

could be exploited by adversaries (Ji, 2007). The blockage of the Malacca leads to

severe loss to the Chinese economy. Heavy dependence on crude oil from Middle

East and Africa for sustainable economic development, energy security has become

a top most priority of China‟s foreign policy. Following are the risks and threat

perceived by China to its energy imports and security:

Political Risk

Oil is a political instrument and a strategic tool to exert pressure on importers for

certain goals or purposes. 1973 oil embargo was first ever international event made

by Arab states during Arab-Israel war to influence world leaders against Israel.

Having gone through such experience, China has heavily invested in the littoral

states of Indian Ocean, especially Pakistan‟s Gwadar port, to secure its energy

supply and seek a shortest alternate route to its main land.

Transportation Risk

China‟s around 60 % crude oil imports shipped through the straits of Malacca every

year and thousands of ships follow this route with full capacity (Zhang, 2008). In

the presence of the United States in the Yellow Sea region, China would always

seek an alternate course for its energy supply to avoid any US blockade. Moreover,

piracy activities close to the Strait of Malacca is another security concern for

China‟s oil transportation. Over the years, a number of piracy activities happened

near the Somalia Coast. In this context, Sino-Pak economic, strategic and political

interests are interlinked. Gwadar port„s overland connection with China‟s western

area presents a foolproof security to China. The port provides a shortest and viable

alternate route for Chinese trade and energy supply in case of Malacca Strait is

blocked by US (Malik, 2012, p. 58).

Figure 3: China’s Crude Oil Imports



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Source: (EIA, 2014, p. 12).

Over the years 30 years especially after cold war, China has emerged as a

leading global economy with ten % growth in its annual GDP growth rates (Hartley,

2010). Therefore, security of its energy and trade flow routes of metals, minerals,

markets for its manufactured goods has been the top most priority of its foreign

policy. In this regard, the completion of Gwadar-Karakoram-Kashgar corridor,

China will stand to benefit from the corridor to import its energy and raw material

from the Persian Gulf while avoiding the Strait of Malacca and the Suez Canal, the

most sensitive chokepoints of the world, which are mostly targeted by Pirates. On

the following grounds, the geo-economic and geo-strategic significance of the

Gwadar deep sea port for China becomes indispensable for its energy imports:

i. In the prevailing deteriorating political situation in the Persian Gulf,

Gwadar deep sea port provides a stable and contiguous point of access

to the Gulf ports. The economic and strategic significance of the

Gwadar deep sea port is multiple.

ii. Close proximity of the port with Strait of Hormuz, one of the main oil

supplies sea routes in the world, Gwadar port will serve as a shipping

point in the region.

iii. The port will facilitate the landlocked Central Asian States and

Western China‟s Xinjiang province with a shortest sea access.

Having assessed the length of the sea route and narrowness of the Malacca

Strait through which 80 % of Chinese oil transported to China remains a security

challenge. The CPEC corridor will be an alternate route for China‟s oil import if the

Malacca Strait is blocked. The corridor will facilitate China to offload its crude oil

imports from the Persian Gulf at the Gwadar port and transport or pump it overland

to Kashgar. The Gwadar-Karakoram-Kashgar corridor will, therefore, decrease

Chinese vulnerability to disruption and closure of Malacca Strait and South China

Sea (Sering, 2012). Moreover, the corridor also offers a logistical benefit by

significantly reducing the distance of 16,000 km to only 2500 km between China‟s

industrial mainland and Persian Gulf (Ibid). China‟s oil imports from the Persian

Gulf through old maritime routes is about 12,900 km which is also threatened by

the Somalian Pirates (Siddiqui, 2014, p. 9). Whereas, China‟s oil imports from the

Persian Gulf to its Kashgar economic zone via Gwadar presents a viable and secure

maritime route which is almost 2,000 miles. Likewise, China‟s Kashgar is 3,500 km

away from the Chinese east coast while its distance is less than 2,000 miles from

Gwadar port. In addition, a 1,100 km long rail-link worth costing US $10.237

billion would reduce the distance between Pakistan‟s capital and China‟s Kashgar, a

trade and economic zone, to a mere seventeen hours.

Gwadar-Karakoram Energy Pipeline

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Natural gas consumption in China has equally risen in the same period in

discussion. China is planning to meet its natural gas demand via gas pipeline and

imports of Liquefied Natural Gas (LNG). Rapid growth in natural gas demand has

driven China to become the third largest LNG importer in the world. This has

equally led China to speed up development pipeline infrastructure for LNG imports.

China‟s natural gas demand has equally risen in the recent past. China is planning to

increase domestic natural gas production in order to replace hydrocarbons with

natural gas in the country‟s energy portfolio. Natural gas consumption in China

stems from Industrial usage (almost 48 % by 2011), power generation, residential

and also in transport sectors have risen (PFC Energy). To meet this demand, China

will continue importing gas through gas pipelines and LNG form (EIA, 2014, p.

17). China‟s investment in gas pipeline infrastructure is too high to link its

production areas in the western and northern regions with demand centers along the

cost and borders to facilitate greater imports from Central Asia and Iran. That is

why, China has promoted the construction of the West-to-East Gas Pipeline in 2002

to mitigate energy requirement in the demanding areas. Moreover, these domestic

pipelines would also be linked with international pipelines of Central Asia and Iran

via Pakistan (Ibid). Another mega project of oil and gas pipelines (OGP) will run

across the corridor while connecting western part of China with IP and TAPI via

Gwadar port (China interested in Trans Himalayan, 2006, p. A1). Vice President of

Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Gwadar-

Xinjiang link would help Pakistan overcome the gas shortage besides strengthening

country‟s economy (Gwadar port, 2013, p. A1). Moreover, China would be able to

take advantage of TAPI and IP gas pipelines through this corridor. Railway link is

also under consideration to connect Central Asia, Afghanistan and Pakistan which

could also be extended to China through the existing railways lines. The corridor

will continue supplying energy to China as an additional supply line.

CPEC: A step towards Xinjiang Development

Economically, China has been divided into eastern, central and western parts. After

economic reforms, the government‟s more focus remained on the development of

its eastern region which is also known as the coastal region (Saeed, 2011). In late

90s, China made a long term strategic planning to develop its western part which is

underdeveloped as compare to the central and coastal parts of the country.

According to Ramtanu Maitra, China‟s east-coast infrastructure is not supportive to

the development of its southern and western regions and other inlet points are

required to feed these regions (April 12, 2005). Chinese „Go West‟ strategy can also

be viewed to uplift economic development of its western province (Malik, 2012, p.

62). China‟s investment in Gwadar port and the KKH is aimed at establishing

shortest and viable energy and trade corridor from its Western province of Xinjiang

to world markets via Gwadar. Gwadar port has bright prospects to develop Xinjiang

province as all trade and oil supply to China would be routed through a shortest and



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viable trade and energy corridor linking these two provinces with Central Asia,

Persian Gulf, Africa and India. To expand traffic flow and fuel consumption, China

has planned to invest US $730 billion in the transport sector in the west China and

US $88 billion in Xinjiang (By 2050, China plans, 2009). According to some

analysts, China‟s huge investment in the Gwadar port and its related projects was

actually based on the fact that its underdeveloped western region would be

connected with the port to put off emerging strife in the region.

According to Zaid Haider, Chinese officials have publicly stated that China

wants to turn Gwadar port into a transit terminal for supply of its crude oil from

Iran, Middle East and Africa to Xinjiang region, facilitating China to secure its oil

shipments along the existing routes (2005, p. 98). The CPEC corridor will help

China develop its relatively backward western regions, particularly Xinjiang which

borders with Pakistan. The port location would facilitate China to transport its

goods via its western region to the port which would generate a variety of economic

opportunities for the local people in the region. China‟s plan of establishing oil and

gas pipeline with an oil refinery at Gwadar port would also facilitate China‟s energy

supply from Persian Gulf and Africa to Western China.

In addition, China lacks hot waters ports which can be operational throughout

the year. The Shanghai port is almost 16,000 km far from the industrial zone of

China and trade through sea takes months and costs heavily in terms of taxes and

duties. Gwadar port on the other hand is not only a hot waters port and can be used

whole year but also closer to China just at a distance of 2,500 km and 1,500 km

from Kashgar economic zone from Chinese border.

China’s Trade Expansion

Gwadar-Karakoram-Kashgar corridor linking Pakistan‟s port with China‟s western

region, especially Kashgar economic zone, is a viable supply chain route to

facilitate bilateral and regional trade among the states encompassing Pakistan,

China, Central Asian States, Afghanistan and Iran. After completion of the ongoing

projects across the borders, China and Pakistan will largely be benefited from the

corridor to expand their economic, strategic and commerce relationship (Khan,

2013, p. 87).

Simultaneously, overland access to Afghanistan and Iran through Pakistan will

considerably diminish threat perceptions emanating from the Indian and American

presence in the Indian Ocean. The existing Karakoram Highway other infrastructure

between Pakistan and China would help China expand its trade with Iran, Middle

East, Central Asia and Africa as the corridor will decrease the sea distance up to

almost 10,000 km (Khalid, 2009, p. 8). Chinese economy is rapidly growing at the

rate of about 9 % per annum with its trade expansion volume of US $1.76 trillion

and GNP growth up to 7.3 % (Malik, 2012). China has estimated US $600 billion of

foreign exchange reserves. China‟s international trade items include micro wave

ovens, photo copiers, Shoes, toys and CD players.

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473

Geo-Strategic Imperatives of the Corridor

Development of CPEC would help Pakistan strengthen its military bases near LoC

and also facilitate its troops and heavy military vehicles to penetrate swiftly and

even deeply into Ladakh and the Kashmir Valley. Likewise, the road connection

along Qala Panja, Mintaka and Wakhjir Passes would facilitate Pakistan with a

direct link with Afghanistan and Tajikistan (Sering, 2012, p. 12). The strategic

dividends of the Karakoram corridor are equal for China. The corridor would allow

Chinese to use Pakistan as a low-cost but high-efficiency deterrent against Indian

growing political ambitions (Afridi & Bajoria, 2010). According to available

resources, the corridor has facilitated China to secretly assist Pakistan militarily. On

the other hand, Pakistan has used the corridor to provide high-tech arsenal and

unexploded American missiles, received during Afghan war from America, to

China for reverse engineering (Sering, 2012, p. 18). Recently, Pakistan gave access

to Chinese engineers to the American Blackhawk chopper that worn-out during the

commando raid that killed Osama bin Laden. Overall, the corridor would be a great

assistance for Pakistan to strengthen its military presence along the Indian border

and enable its army to station in PoK for close watch on the enemy activities

(Sering, 2012, p. 18).

Case Study: The Impact of Trade Corridor on Lao Peoples’ Republic

Source: (Luanglatbandith, 2007).

Conclusion

In Pakistan‟s foreign policy, sustainable economic growth and security are its

primary priorities. To achieve these two objects, China‟s investment in the

construction of the corridor will be a great assistance for Pakistan on these fronts.

Moreover, China‟s close association with Middle East and Africa and the proximity

of Pakistan‟s Gwadar port to the energy hubs, the CPEC emerges as a future

primary oil supply route to China (Blank, March 09, 2010). The usefulness of

Karakoram corridor for China is linked with its ability to transport the required

quantity of crude oil from Gwadar port to Xinjiang. The corridor will act as an

alternate supply line which will help China stockpile oil reserves to counterbalance

future shortage. In this context, Pakistan‟s Gwadar port and CPEC emerge

indispensable for both China and Pakistan for their economic development. The

conduit would provide a variety of world class transport services such as modern

Another similar trade corridor known as ‘The East-

West Economic Corridor (EWEC)’ connecting Lao

Peoples’ Democratic Republic is a glaring example of

regional economic integration and development. The

corridor has considerably reduced travel times and

proved to be economical in terms of cost-effectiveness.

Other economic impact can be manifested from the

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dry-port infrastructure, freight management, trucking, border terminals, customs

clearance and an efficient logistical chain which would help expand regional trade.

The corridor is expected to expand economic activities between the two neighbors

with an advantage to advance their strategic interests in the Persian Gulf.

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_______________________________

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